Micro and Macro Marketing environment, PESTLE, Demographic environment, cultural environment, technological environment, Marketing and other departments in an organization

1. Basics of Marketing – MBA I
1MBA-I MIBM

2. 2
Why a product like radio declined
and now once again emerging as an
entertainment medium?
MBA-I MIBM

3. 3
What Were the Drivers of This Change ?
 Technology ?
 Government policy ?
 Other media substitutes ?
 Change in Consumers’ Preferences ?
 Change in Economic Conditions ?
MBA-I MIBM

4. 4
Why Market Leaders Suffered?
 Market leadership
today cannot be
taken for granted.
New and more
efficient companies
are able to upstage
leaders in a much
shorter period.
MBA-I MIBM

5. Marketing Environment
 The marketing environment consists of
actors and forces outside the organization
that affect management’s ability to build and
maintain relationships with target customers.
 Environment offers both opportunities and
threats.
 Marketing intelligence and research used
to collect information about the environment.
5MBA-I MIBM

6. Marketing Environment
 Includes:
 Microenvironment: actors close to the
company that affect its ability to serve its
customers.
 Macro environment: larger societal forces
that affect the microenvironment.
○ Considered to be beyond the control of the
organization.
6MBA-I MIBM

7. Analyzing the
Macroenvironment

8. Needs and Trends
Fad
Megatrend
Trend

9. Marketing Environment
 Analyzing the Macroenvironment
 Needs and Trends
○ Fads – “unpredictable, short-lived, and
without social, economic and political
significance”
○ Trend – “direction or sequence of events that
has some momentum & durability”
○ Megatrends – “ large social, economic,
political and technological changes that are
slow to form and once in place, they
influence us for some time between 7-10
years or longer”
9MBA-I MIBM

10. Marketing Environment
 Analyzing the Macroenvironment
 Identifying Major Forces
○ Suppliers, intermediaries, customers,
competitors, and public – Is their behaviour
controllable?
○ A steep decline of stock market affects
savings, investment, retirement funds etc,
increasing unemployment, corporate
scandals, rise of terrorism.
○ Six major forces – Demographic, economic,
social-cultural, natural, technological, political
& legal.
10MBA-I MIBM

11. Then GOOGOL now
GOOGLE
 Founded in 1998 by two Stanford
university PhD students.
 Corporate mission – To organize
the world’s information and make it
universally accessible and useful.
 Larry Page & Sergey Brin
 AdWords, Analytics, Maps,
Finance, Local, Gmail, Google+,
Youtube, Androids, Duo etc.
 Abc.xyz (Alphabate)
11MBA-I MIBM

12. The Marketing Environment
Company
Demographic
Economic
Natural
Technological
Political
Cultural
Company
Customers
Intermediaries
Suppliers
Competitors
Publics
12MBA-I MIBM

13. Major Environmental
Forces
Economic
Sociocultural
Natural
Technological
Political-Legal
Demographics

14. Demographic Environment
Worldwide population growth
Population age mix
Ethnic and other markets
Educational Groups
Household patterns

15. The World as a Village
If the world were a village of 100 people:
61 – Asian (20 Chinese, 17 Indian)
18 – Unable to read (33 have cell phones)
18 – Under 10 years of age (11 over 60
years old)
18 – Cars in the village
63 – Inadequate sanitation
67 – Non-Christian
30 – Unemployed or underemployed
53 – Live on less than $2 a day
26 – Smoke
14 – Obese
01 – Have AIDS
Source: David J. Smith and Shelagh Armstrong, If the World Were a
Village: A Book About the World’s People, 2nd ed. (Tonawanda, NY: Kids
Can Press, 2002)

16. 17MBA-I MIBM
Rank Continent Population
1 Asia 4,140,000,000
2 Africa 1,033,000,000
3 Europe 739,000,000
4 North America 529,000,000
5 South America 386,000,000
6 Oceania (Australia) 36,000,000
7 Antarctica 4,000
Age
group
Total Rural Urban
0-14 29.5 30.9 25.5
15-59 62.5 61 66.6
60+ 8 8.1 7.9

17. The Demographic
Environment Demography
 The study of human population in terms of size,
density, location, age, gender, race, occupation, and
other statistics.
 The World’s large & highly diverse population pose
both opportunities & threats.
 E.g. China’s policy to control population growth.
 Keeping track of changing age, family structures,
geographic population shifts, educational
characteristics, & population density.
18MBA-I MIBM

18. The Demographic
Environment Population Growth
 World wide population estimation 8.82 billion by 2040.
(9 billion by 2045)
 Developing regions account for 84% of population (1-
2% growth).
 More developed countries growing at 0.3%
 Death rate is falling (life expectancy in India – 69.1 yrs)
 India 17.7% of world population.
 Population size & growth rate. (Approx 3000 births/hr &
1000 deaths/hr)
19MBA-I MIBM

19. The Demographic
Environment Population Age Mix
 Mexico – young population & rapid
population growth.
 Japan – world’s oldest population.
 So milk, diapers, school supplies &
toys will be more imp in Mexico than
in Japan
 Median age India – 23.8, Pakistan –
22.2, Sri lanka – 29.5 etc.
 Literacy Levels of Population
 71.02% in India (2017 estimate)
 Youth Literacy Rate is 90.2% (2015)
0-
14
yrs
15
–
24
25-
54
55-
64
<
65
yrs
27.
3%
17.
9%
41.
1%
7.5
%
6.3
%
Male Female
81.3% 60.6%
20MBA-I MIBM

20. The Demographic
Environment Increasing Population
 More population in urban areas (34% 2020) (49% by 2050).
 Growth Rate – 1.1% (2018)
 A growing middle class
 Deprived households –
○ Annual household income less than Rs. 90000, poorest economic class,
unskilled or semi-skilled daily wage earners.
 Aspirers
○ Rs. 90000 to Rs. 200000., small farmers, small retailers, low skilled
industrial workers.
 Seekers
○ Rs. 200000 to Rs. 500000, white collar employees, mid level govt.
officials, newly employed young postgraduates, and medium scale
traders & businesspeople.
 Strivers
○ Rs. 500000 to Rs. 1000000, established professionals like lawyers,
doctors, CAs, MBAs, senior govt. officials, medium scale
industrialists, rich farmers.
 Global Indians
○ In excess of Rs. 1000000, Senior corporate executives, large business
owners, topmost professionals, politicians, film actors, big farmers,
graduates from leading institutes.
Middle
class
Seekers &
strivers
7 million
households
87 million
by 2025
21MBA-I MIBM

21. Demographic
Environment
 Increasing Population
 A Growing Middle class
 Population in Rural India
 Generational Marketing
 The changing family system
 The changing role of women
 A Better-Educated, More White-Collar, More
Professional Population
 Increasing Diversity
MBA-I MIBM 22

22. The Demographic
Environment Growth in rural population
 By 2050 rural population will be 50% of total population.
 Some problems like, purchasing power, lack of proper infrastructure, reliable
supply of electricity etc.
 A Changing Family System
 Joint family system – able bodied men will be bread earners, women looks after
kitchen, elderly look for cultural norms & preach value to kids.
 Dual income single kid (DISK)
 The changing role of women
 Education, more ambitious, earning more, more active member of family.
 A better educated, more white-collared, more professional population
 789 universities and 37,234 colleges
 More educated people will demand more quality product, books, magazines,
travel, personal computers, & internet services.
 Increasing Diversity
 Inner state diversities are increasing
23MBA-I MIBM

23. Economic Environment
Consumer
Psychology
Income
Distribution

24. Economic Environment
 Factors that affect consumer purchasing power & spending
patterns.
 Industrial economy, Developing economy, Subsistence economy,
 The Global Financial Crisis
 Subprime housing loans issued in US (2007-09), most stock markets in world
crashed, severe lending crunch, inflation, less exports, less FDI, less GDP
growth.
 In India demand for housing, construction, consumer durables & IT sector were
affected most.
 Changing Income distribution & Consumer spending pattern
 Rich have grown richer.
 Growing urban middle class.
 Purchase of consumer items increasing.
 Mercedez – Benz targets affluent; Tata Motors – modest means, Maruti-Suzuki
 Current income, prices, savings, debt & credit availability.
25MBA-I MIBM

25. Economic Environment
 India GDP per capita – $ 1997 and growing at 7.74% $FY
2017-18
 Healthy foreign exchange reserves (US$ 387 billion approx),
Inflation (CPI / WPI); (inflation 3.69%); (3.3%YTD) in Aug 18
 Income Distribution –
 Lower income households declining continuously.
 Destitute – annual income of Rs. 16000
 Aspirants – 16000 – 22000
 Climbers – 22000 – 45000
 Consuming class – 45000 – 215000
 Rich – more than 1000000 lakhs annual income
 Demand is likely to increase, additional opportunities for new
products & services, Business expansion etc.
26MBA-I MIBM

26. Walt Disney markets two distinct Pooh bears to match its two-tiered
market.
27MBA-I MIBM

27. Ourselves
Others
Universe
Organizations
Society
Nature
Sociocultural
Environment

28. Social-Cultural
Environment Society shapes the beliefs, values, & norms that largely define
consumer tastes & preferences.
 Ethnic Diversity – one fifth of the world
 Major religions – Hinduism, Islam, Sikhism, Christianity, Buddhism & Jainism
 Different languages & thousands of dialects.
 Customs, social systems, Values, habits, Religions & Caste
Systems.
 E.g. Dress codes, food habits, local advertising, regional biases for brand
preferences,
 Progression from traditionalism & self sacrifice to westernization &
individualism.
 Increased Emphasis on Ethics & Socially Responsible Actions
 Socially responsible behaviour – business scandals, environment issues, online
privacy issues, transfer of digital data etc.
 Cause-related marketing – linking to a worthwhile cause, selling strategy than
giving strategy. But may give company good image.
 E.g. CRY greeting cards.
29MBA-I MIBM

29. Cultural Environment
 Made up of institutions & other forces that affect
society’s basic values, perceptions, preferences, &
behaviors.
 Persistence of Cultural Values
 Most Asians believe in working, getting married & giving
to charity and have strong faith in religion.
 Core beliefs & values passed on from parents to
children & are reinforced by schools, religious institutions,
business, & government.
 Secondary beliefs are more open to change.
 E.g. Getting married is core belief but getting married
early in life is secondary belief.
30MBA-I MIBM

30. Cultural Environment
 Shifts in Secondary Cultural Values
 Impact of Music groups, movie personalities, & other
celebrities on a variety of areas like clothing & hairstyles.
 People’s views of themselves
○ Some seek personal pleasure, wanting fun, change etc.
○ Others seek self realization through religion, recreation, or
pursuit of career or other life goals.
○ Selects products those match their views of themselves.
 People’s views of others
○ Digital Age and Communication
○ People like to stay at home to enjoy the comforts of home &
connect with others through advanced technology.
○ Less demand for theater going & more demand for home
improvement, home office, & home entertainment products.
31MBA-I MIBM

31. Cultural Environment
 Shifts in Secondary Cultural Values
 People’s views of Organizations
○ Changing Attitudes towards corporations, government agencies,
trade unions, universities & other organizations.
 People’s views of Society
○ Patriotism theme used for promoting ideas & products on
Independence day.
 People’s views of Nature
○ Nature is finite & fragile that can be destroyed or spoiled by human
activities.
○ Organic food products
 People’s views of Universe
○ Moving away from religious to spiritual.
○ Heightened sensitivity presents unique marketing opportunity.
○ E.g. Aastha TV channel, Ayurvedic treatment.
32MBA-I MIBM

32. Technological Environment
Accelerated pace of change
Unlimited opportunities
R&D Spending

33. Technological
Environment Best – antibiotics, robotic surgery, smartphones, internet
 Dangerous – Nuclear missiles, nerve gas, machine guns
 Mixed blessings – automobiles, television, credit cards, Cell
phones, & video games.
 Creative destruction
 New technology affects the economy’s growth, creates new markets
& opportunities & replace old technology.
 Transistors hurt vacuum-tube industry, CDs hurt cassettes, digital
photography hurt film business etc.
 Tracking through RFID, GPS, Bluetooth etc.
 Four trends
 Accelerating pace of change
 Unlimited Opportunities for innovation
 Varying R & D budgets
 Increased regulation of technological change.
34MBA-I MIBM

34. Political-Legal Environment
Special Interest Groups
Government Agencies
Laws

35. Political-Legal
Environment Laws, government agencies, & pressure groups.
 Increase in Business Legislation (Public Policy)
 To protect companies & consumers from unfair
competition, to protect interest of society from unfair
activities, to charge business with social costs.
 Laws to cover competition, fair-trade practices,
environment protection, product safety, truth in
advertising, consumer privacy, packaging and labeling,
pricing etc.
 At National, State & local level.
 Legal review procedures & guide business according to
ethical standards
36MBA-I MIBM

36. Political Environment
 The growth of special interest groups
 Consumerist movement
 Consumer protection act – Safety, Information, Choice,
Representation, Redressal & consumer education.
 Increased Emphasis on Ethics & Socially
Responsible Actions
 Socially Responsible Behaviour
 Cause Related Marketing
 Includes Laws, Government Agencies, and
Pressure Groups that Influence or Limit Various
Organizations and Individuals In a Given Society.
 Changes in tariff & quota regimes may have direct
impact on the profitability, survival of business.
37MBA-I MIBM

37. Natural Environment
Environmental
Regulations

38. Natural Environment
 Involves the Physical environment & natural resources
that are needed inputs by marketers or that are affected by
marketing activities.
 Floods in Kerala
 Auto Dealers, restaurants, airlines, tourist destinations
 Packaged drinking water, mosquito repellent, auto repair centers
 FedEx & UPS – employs meteorologists
 Greenhouse gases, Global warming, Shortage of drinking
water, Garbage issue in Urban India
 Deterioration of natural environment – shortage of raw
materials.
 Increased pollution – disposal of chemical & nuclear waste,
dangerous mercury levels in sea, quantity of chemicals in soil
& food, plastic & other packaging materials.
 Conserving natural resources
39MBA-I MIBM

39. Natural Environment
 Increased Govt. Interventions - New
regulations, environment protection agency,
NGOs etc.
 CPCB, Ministry of Environment, Forest & Climate
Change
 Environment Sustainability – an effort to create
a world economy that planet can support
indefinitely.
 Companies are developing recyclable & biodegradable
packaging, recycled materials & components, better
pollution controls, & more energy efficient operations.
40MBA-I MIBM

40. MBA-I MIBM 43

41. MBA-I MIBM 44

42. Actors in the Microenvironment
45MBA-I MIBM

43. The Company’s Microenvironment
 Company’s Internal Environment:
 Areas inside a company.
 Affects the marketing department’s
planning strategies.
 All departments must “think consumer” and
work together to provide superior customer
value and satisfaction.
46MBA-I MIBM

44.  The Company – top management, finance, R & D, purchasing,
operations, & accounting.
 Suppliers –
 Provide resources needed to produce goods and services.
 Important link in the “value delivery system.”
 Most marketers treat suppliers like partners
 Marketing Intermediaries
 Help the company to promote, sell, and distribute its goods to final buyers
○ Resellers – wholesalers, retailers
○ Physical distribution firms – to stock & move goods from their point of origin to
destination
○ Marketing services agencies – marketing research firms, advertising agencies,
media firms, & marketing consultancy firms.
○ Financial intermediaries – banks, credit companies, insurance companies.
○ E.g. Coca cola signs on as exclusive beverage provider for fast food chains.
47MBA-I MIBM

45.  Competitors
 Those who serve a target market with products and services that are viewed by
consumers as being reasonable substitutes
 Company must gain strategic advantage against these organizations
 Publics
 Group that has an interest in or impact on an organization's ability to achieve its
objectives
 Customers
 Five types of consumers – consumer markets, business markets, reseller markets,
government markets, international markets
48MBA-I MIBM

46. Responding to the Marketing
Environment
 Environmental Management Perspective
○ 3 type –
 Those who make things happen,
- Develop strategies to change environment
- Apple’s iPod & iPhone, Google’s search engine,
Patanjali’s Ayurveda products, Amazon’s online market
place
- Taking a proactive approach to managing the environment
by taking aggressive (rather than reactive) actions to affect
the publics and forces in the marketing environment.
- Hiring lobbyists
- Running “advertorials” (ads expressing editorial point of
views)
- Pressing lawsuits
- Filing complaints
- Forming agreements to control channels
49MBA-I MIBM

47. Responding to the Marketing
Environment
 Environmental Management Perspective
○ This can be done by:
 Those who watch things happen,
- Passively accept marketing environment & don not try
to change it
- Must react and adapt
 Those who wonder what’s happened
50MBA-I MIBM

48. Marketing & Other business
Functions
 Finance & Marketing
 Financial Dimensions – Cost & Profit history of
business, financial statements, budgets, ROI,
ROE, ROS etc.,
 Marketing decisions as investment decisions.
 Financial tools & criteria to evaluate investment.
 Capital allocation based on expected returns.
 Evaluation of M&A – both marketing & financial
view
MBA-I MIBM 51

49. Accounting & Marketing
 Firms' cost allocation procedure
 Use fully allocated costs rather than
variable costs depicts distorted picture
of product profitability.
 Responsibility accounting.
 Evaluation of marketing performance –
selling or advertising costs as a % of
sales.
 Forecast data.
MBA-I MIBM 53

50. Production & Marketing
 Production capabilities determine no &
types of products which can be
marketed.
 Marketing – accurate sales forecast.
 Change in production capacities.
 Size of new plants depends on market
research based estimation of demand.
 Conflicts.
MBA-I MIBM 54

51. Customer Service &
Marketing
 Customer complaints – solved or not.
 No of complaints
 Type of complaints
 Regular line of communication between
customer service & marketing
MBA-I MIBM 55

52. Procurement & Marketing
 Many firms modifying products to
substitute scarce raw material with more
available, cheaper or legally available
ones.
 Shortage of coffee – increase in price of
coffee beans – changes in the brand’s
strategies.
MBA-I MIBM 56

53. R & D - Marketing
 R & D – New product Development
 Product design – market research
 Marketing research may provide
important insights into customer’s
unsolved problem & needs.
 Realistic Expectations.
 R&D may decide the future of new
products.
MBA-I MIBM 57

54. HRM & Marketing
 HRM – hiring, training & management
 Develop job description, screen
candidates, design training programs &
incentives.
 Value of human capital
MBA-I MIBM 58

55. Legal & Marketing
 Government interventions
 Advertising claims
 Legal function of firm, brand name
requires legal clearance, new product
approvals, pricing policies etc.
 Legal dept – risk avoidance
 Marketing – Risk taking
MBA-I MIBM 59

56. Top Management & Marketing
 Provide guidance, inspiration,
encouragement & control of firms
marketing & non marketing efforts.
MBA-I MIBM 60

57. Market Potential
 Consists of the set of consumers who profess a
sufficient level of interest in a market offer.
 Total amount of possible sales in the market.
 Total Market potential – The maximum
amount of sales that might be available to all
the firms in an industry during given period,
under a given level of industry marketing effort
& environmental conditions.
 Total Market potential = potential no of
buyers * Average quantity purchased by
buyer * The price.
MBA-I MIBM 61

58. Market Potential
 Well defined geographic area
 Entry / Exit decisions
 Resource Allocation decisions.
 Forecast
MBA-I MIBM 62

59. Estimation of market
potential
 Estimation by analogy
 Comparing data from similar countries
 Problems: geography, culture, tradition and Historical reasons
 Income elasticity of demand
 Market’s level of development
 Regression Analysis
 Demand for any product = f(income, price, competition, etc.)
 Input-output tables
 provides a summary of the structure of an economy by showing
the impact of changes in the demand for one industry’s product
on other industries product
 Relationship between economic sectors
 Published by UNCTAD/GATT/WTO
MBA-I MIBM 63

60. Market Share
 JD Power Asia Pacific estimates automobile
market size to about 9.3 million units by 2020
 Watch industry size to touch Rs. 15000 crore by
2020
 Baby care products Rs. 9000 Cr by 2020

61.  Rs 6300 crore
 Maaza – 48% share
 Frooti – 25.6%
 Slice – 23.4%
 Other – 3%
MBA-I MIBM 65

62. Market share
 Market share is the portion or percentage
of sales of a particular product or service in
a given region that are controlled by a
company.
 example, there are 100 products sold in a
country and company A sells 43 of them, then
company A has a 43% market share

63. Market Share
 Or – you sold a product for a total cost
of Rs. 1000 and the people in the
country spend a total of Rs. 2,000 on the
same widgets, then the market share is
1000/2,000 or 50%
 The two different methods of calculating
market share won't always provide the same
answer,

64. Market Share
 Market share is used by businesses to
determine their competitive strength in
a sector as compared to other
companies in the same sector
 Methods
 No of buyers
 Percentage of sales

65. Method 1 – Number of Buyers
 Estimate the total number of buyers in
your market and determine how
successful your competition is
 Per month, estimate the number of
people that will buy your product or
service
 This is your percentage

66. Method 1 – Number of Buyers
 Ex/ Organic Coffee House
 Number of Coffee shops – 3040
 Market Share = 76% of Coffee and Baked
Goods
 A Coffee shop sells 3 million cups a day
 3,000,000/ 3,040 = 987 cups sold per day per
store
 987* 30 days = 29,605 per month
 29,605 / .76 = 38,954 cups a month for a store
to have 100% market share in their area

67. Method 1 – Number of Buyers
 Our Organic Coffee House should get
2% of the market, based off of the
following data… (trends that support
your business) 2% of total market share
or 779 cups sold a day
 38,954 * 0.02 = 779 cups sold a day

68. Method 2 – Percent of Sales
 Total Market Share of top 5 competitors and
average last five years of sales
 Ex/ Organic Coffee House
 Top Five Competitors
 Tim Horton’s – 76% - Sales $14 billion
 Starbucks – 7% - Sales $1.3 billion
 Timothy’s Coffees World Inc – 4% - Sales $736
million
 Second Cup – 2% - Sales $386 million
 William's – 1.5% - Sales $276 million

69. Home Assignment
 Find out the market potential for
Wooden toys in India.
 Demonstrate the market share for
Internet Service providers in India.
MBA-I MIBM 73

70. 74MBA-I MIBM